Dire expectations for the financial services industry are not bearing out, despite turmoil on Wall Street and general economic downturn, according to findings from Ernst & Young (New York) that were presented in November at the firm's Financial Services Outlook 2003 conference.
For example, in banking, equity in homes is at the lowest point it has been in a decade, according to Barry Kroeger, director of banking for the Americas for Ernst & Young. "Consumers are really funding the economy by borrowing from their homes and drawing on equity lines," he said. Kroeger noted that regulatory and legislative issues will continue to be a major focus in the industry in 2003.
In insurance, the picture has not been all rosy, due to factors such as the equity market downturn, pressure to replace capital losses due to the 9/11 terrorist attacks and low interest rates, noted Peter R. Porrino, E&Y's global and Americas director for the insurance industry services. Accordingly, a number of trends are bucking conventional wisdom in the industry.
For example, the assumption that e-commerce, convergence and cross-selling would transform the ways insurance products are distributed has been proved wrong, for the most part, according to Porrino. Similarly, risks, far from being fully understood and well managed, are proving to be a moving target, as insurers scramble to prepare for new and emerging risks such as terrorism, asbestos, litigation and mold.